Thanks Guys, at least its not just me that feels I have been done wrong.
I registered a complaint with Ebay about this, Ebay suggetsed I contacted a specific police department dealing with these crimes. I thought this was a little extreme and Ebay was just passing the buck.
However within 2 hours, the guy said he would accept it back. (which made me think Ebay had actually contacted him telling of what action they recommended).
I shall be posting the item back to him tommorow morning, and hopefully getting a full refund shortly after (or another chapter will be created).
Just to let you know - the item was a military dress jacket - I had a formal, dinner to go to, and being a reservist, we do not get issued this kit, and have to buy it our selves. Ebay is a place these things get sold on. And as you can imagine - going to a formal dinner - you do not want to be wearing ripped, faded and tatty clothes.
I currently have not left any feedback, neither has he. I am still in two minds as what to do, being unsure, I have not told Ebay about his threat. A satisfactory outcome should be obtained, I hope. He can't be that bad - he has over 1500 sales....